Author Michael Lewis faced criticism on social media on 1 October following an interview with 60 Minutes on CBS about FTX founder Sam Bankman-Fried that was widely decried as unjustifiably credulous.
Among the critics was short seller Jim Chanos, founder of Kynikos Associates, who has a long and storied history betting against notorious financial frauds, including Enron and bankrupt German payments giant Wirecard.
In a post on X, the social-media platform formerly known as Twitter, Chanos slammed Lewis for parroting language attributing the fall of FTX to a bank run.
“This was literally Enron’s defence. ‘If it wasn’t for those meddling short-sellers and journalists causing a run-on-the-bank, we would’ve been fine.’ This is nonsense, as both FTX and Enron were both massively insolvent, not illiquid,” said Chanos, who has long been associated with the @WallStCynic handle on X.
Bankman-Fried first blamed the collapse of his crypto empire on a run on customer deposits shortly after the group of companies filed for bankruptcy protection in November following a spectacular and sudden unravelling.
While FTX’s fate was partly sealed by a $6bn run from customer deposits, a presentation filed in March as part of the bankruptcy court process showed Bankman-Fried’s former empire had a massive $6.8bn hole in the balance sheets of its associated companies.
To be sure, the appreciation in cryptocurrency prices this year has boosted the value of some of these assets, according to court filings made by the company’s attorney.
Bankman-Fried will face charges of wire fraud, securities fraud and money laundering when his trial in Manhattan federal court begins on 3 October.
CBS aired the 60 Minutes interview with Lewis — author of bestselling books Liar’s Poker, The Big Short, Moneyball and The Blind Side — on 1 October where Lewis shared tidbits from his book about FTX and Bankman-Fried. The author was criticised for defending the erstwhile crypto wunderkind.
At one point, Lewis claimed that SBF’s fall had left a “Sam Bankman-Fried-shaped hole in the world”. The author also said that “if there hadn’t been a run on customer deposits, they’d still be sitting there making tons of money.”
READ Michael Lewis reveals Sam Bankman-Fried’s weirdest moments
Others including Chanos pointed out that the firm wasn’t just illiquid, but insolvent.
A key difference between being illiquid and insolvent is that an illiquid firm has high-quality assets that it can either sell or use as collateral for loans, while an insolvent firm does not.
For example, Alameda Research’s balance sheet, according to initial reporting by CoinDesk that preceded the collapse of the group of companies, was stuffed with the FTT token, which was issued by Alameda’s sister company, the FTX exchange, and which had seen a marked decline in value during the run-up to FTX’s collapse.
This article was published by MarketWatch, part of Dow Jones
